Promo Spending Falls

Packaged goods companies have shifted $12 billion to trade promotion from consumer marketing since 1997, despite their intentions to cut trade spending. In fact, more marketers than ever – 93 percent – rate trade promotion inefficiency as their biggest concern. And 78 percent of retailers call inefficiency a very or extremely important issue, according to Cannondale Associates’ 1999 Trade Promotion study.

So what gives? “As trade spending goes up, of course concern over its efficiency goes up, too,” says Cannondale consultant Sven Risom.

The study concludes that trade spending is up for four reasons. Consolidation makes for bigger, smarter retailers. Fiercer competition forces chains to differentiate more. Technology (especially frequent-shopper cards) lets retailers analyze consumer dynamics. And shopper loyalty is waning.

With money funneled away from consumer spending, brand equity is eroding. Cannondale recommends marketers add equity to their basic equation of efficiency and effectiveness, and use frequent-shopper data to measure how trade promos help or harm brand equity.

“Trade promotion continues to be a critical investment to get products merchandised well,” Risom explains. “You want to spend money against your most profitable consumers. You can use loyalty-card data to measure purchases and then tailor trade promotion tactics to different consumer groups. You can’t do that with traditional feature and display.”